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Buying a home is a major life step. Homes are by nature expensive and most home buyers cannot afford to purchase a home outright. Because of that reality, most home buyers finance a home purchase with a mortgage. A mortgage allows you to spread the payments for a home loan across many years. The result? Mortgages can make home ownership much more attainable for the average home buyer.
Why now is a great time to buy
Currently, mortgage rates are at historic lows, meaning that the cost of borrowing funds is lower than it has been in previous years. If it fits within your budget, now is a good time to purchase a home. In fact, Vanderbilt Mortgage is offering new home buyers who chose to finance their home purchase with Vanderbilt 60 days with no payments after their mortgage loan funds. This provides a new home buyer time to settle into their new home and pay for the costs associated with moving — without having to immediately account for their first mortgage payment.
Benefits to paying a mortgage off faster
While mortgages definitely make sense for most home buyers, there are advantages to paying off a mortgage before it reaches full term.
Because paying down your mortgage early:
Builds equity for resale. Paying down the principal balance on a mortgage can build equity in your home faster. Equity is defined as the market value of the home, minus the amount owed on the mortgage. For example, if your home is worth $150,000 and you owe $100,000 on the mortgage, then you have $50,000 worth of equity in your home. This equity can then be utilized when you sell your home, for a down payment on your next home. In addition, some of the equity could be used to qualify for a home equity loan to make home improvements.
Frees up cash for later. Another benefit to paying down your mortgage earlier is reducing the years the mortgage is active. Paying the mortgage off earlier will free up the money that was needed for a monthly mortgage payment, allowing that money to be spent on other items — or saved for retirement or an emergency fund.
How to pay off your mortgage faster
If you’re interested in paying your mortgage off more quickly, here are two common strategies you can use:
Extra payments every month. A more common way to pay a mortgage down early is simply to make extra payments to the loan’s principal each month, as frequently as possible. Whether it’s five dollars or one hundred dollars extra per month, every additional principal payment you can make toward paying a mortgage down more quickly really adds up. To show you how that would work, Vanderbilt Mortgage has developed an early payoff calculator to show how much you can save by paying extra toward the principal each month.
Annual Additional Payments to Principal – You can also help pay your mortgage off faster by making extra payments to principal once a year. Whether it be a tax refund you receive, yearly bonus or extra savings, this investment toward paying your mortgage off sooner can help save interest cost in the future.
Go at your own pace
It’s important to remember not to overextend yourself while you’re working to pay a mortgage down. Create a realistic budget and go at a pace you can afford, and you will reap the long-term benefits. Your future self will thank you! Visit Vanderbilt Mortgage to learn more home owner tips or apply for mortgage today!
All loans are subject to credit approval.
Vanderbilt Mortgage and Finance, Inc., 500 Alcoa Trail, Maryville, TN 37804, 865-380-3000, NMLS #1561, (http://www.nmlsconsumeraccess.org/), AZ Lic. #BK-0902616, Loans made or arranged pursuant to a California Financing Law license, GA Residential Mortgage (Lic. #6911), MT Lic. #1561, Licensed by PA Dept. of Banking.